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Wall Street's Mixed Signals on HIMS: Growth vs. Growing Pains

Eli GrantWednesday, May 7, 2025 1:37 am ET

4min read

HIMS --

In late May 2025, Hims & Hers Health (HIMS) announced a strategic partnership with Novo Nordisk to distribute Wegovy, a FDA-approved weight-loss drug, just as the FDA ended its shortage designation for compounded semaglutide—a key revenue driver for HIMS. The deal was widely seen as a lifeline for the company, which faced a June 2024 deadline to stop selling its compounded weight-loss products. Yet, despite this blockbuster news, Wall Street punished the stock: shares fell 4% in after-hours trading after HIMS reported strong Q1 results but issued cautious Q2 guidance. This reaction raises a critical question: Is the market pricing in short-term execution risks, or is it underestimating the long-term potential of HIMS’s pivot to personalized healthcare?

The Catalyst: Q1 2025 Earnings and the Wegovy Deal

HIMS’s Q1 2025 results were undeniably robust. Revenue surged 111% year-over-year to $586 million, with net income hitting $49.5 million and adjusted EBITDA reaching $91 million—50% above estimates. Subscribers grew to 2.4 million (up 38% YoY), driven by demand for its sexual health and hair loss products. The Wegovy partnership with Novo Nordisk, announced alongside these results, promised to offset the loss of compounded semaglutide sales, which had contributed ~20% of revenue.

Yet investors focused on the company’s Q2 guidance: revenue of $530–550 million (below the $564 million consensus) and adjusted EBITDA of $65–75 million. Management attributed the cautious outlook to the abrupt end of compounded semaglutide sales and the ramp-up costs of new offerings like Wegovy and liraglutide. Analysts, however, saw red flags.

Why the Market Reacted Negatively

Margin Pressure: Branded drugs like Wegovy carry lower margins than compounded versions. Gross margins dipped to 81% in Q1 (down from 82% in 2023) due to scaling costs for GLP-1 drugs, and management warned of further pressure in Q2.
Transition Headwinds: Halting compounded semaglutide sales by May 2024 created a revenue “dip” in Q2, with recovery expected only in the second half of 2025.
Competition Intensifies: Novo Nordisk and Eli Lilly now directly compete with HIMS for Wegovy and Ozempic prescriptions, respectively. HIMS’s ability to retain customers on lower-margin branded drugs remains unproven.
Subscriber Growth Slows: The 2.4 million subscriber count fell short of expectations (2.42 million), raising concerns about market saturation in core segments like erectile dysfunction.

The Bulls’ Case: Long-Term Vision vs. Short-Term Pain

HIMS’s management emphasized its 2030 roadmap, targeting $6.5 billion in revenue and $1.3 billion in adjusted EBITDA. To achieve this, the company is diversifying beyond weight loss into women’s health, menopause care, and at-home diagnostics. The appointment of Nader Kabbani (a 20-year Amazon veteran as COO) signals a push to improve operational efficiency, with plans to expand fulfillment infrastructure to 700,000 sq. ft.

Analysts at Piper Sandler and Morgan Stanley raised price targets to $39 and $40, respectively, citing HIMS’s subscriber retention rates (80% in Q1) and the scalability of its digital health platform. The company’s daily-use premium products (e.g., hair loss treatments) now account for 40% of sales, offering recurring revenue streams insulated from drug pricing wars.

The Bottom Line: A Stock at a Crossroads

HIMS is at a pivotal juncture. The market’s short-term skepticism is justified: near-term margin pressures, execution risks in transitioning to branded drugs, and slowing subscriber growth all pose hurdles. Yet, the company’s Q1 performance—$586 million in revenue with 111% YoY growth—and its long-term vision for a $6.5 billion healthcare ecosystem are compelling.

The key question is whether HIMS can balance growth and profitability. If it meets its 2025 full-year targets ($2.3–2.4 billion in revenue and $295–335 million in EBITDA), the stock could rebound. But investors will demand proof that the Wegovy partnership and diversification into new verticals can sustain momentum.

For now, the stock’s pullback to the $33–$35 range—a 37% drop from its May 6 high of $50.56—suggests the market is pricing in execution risk. But with 80% of subscribers staying on its platform and a focus on high-margin services, HIMS remains a high-risk, high-reward bet on the future of personalized healthcare. The next few quarters will determine whether Wall Street’s skepticism or its ambition wins out.

Conclusion: HIMS’s stock stumble after Q1 results reflects valid concerns about short-term challenges, but its long-term potential as a healthcare disruptor cannot be ignored. Investors must decide: Is this a buying opportunity at a key support level, or a warning sign of a fading growth story? The answer may hinge on whether HIMS can execute its pivot to branded drugs and diversified services without sacrificing profitability—a tall order, but one the data so far suggests is achievable.

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